Have You Considered an RESP for Your Child?

Saving for your child’s education can have a tremendous impact. Putting money away each year ensures that your child will have money available for post-secondary education, reducing the amount needed through student loans.

There’s a radical long-term concept available to help you finance your child’s education. It’s known as FREE MONEY!

A Registered Education Savings Plan (RESP) can reap you a substantial amount throughout your kids’ childhood.

The federal government provides 20 cents for every contributed dollar, up to a maximum of $500 per year, through the Canada Education Saving Grant (CESG). Some families can earn an additional 10 or 20 cents per dollar if their annual income is below specific amounts.

You must open an RESP through an institution offering them, such as Sunrise Credit Union. There are two types of RESP. Individual plans, where a single beneficiary or a family plan, where multiple beneficiaries may be named though they must all be related.

While they aren’t tax-deductible like RRSPs, RESPs do offer some tax benefits. Interest earned on an RESP is tax-free, and when your child starts using the money for school, only the accumulated interest is taxable as income.

If you don’t have an RESP currently, get one. If you do, maximizing your contribution, if possible, is something to consider strongly. Statistics show the majority of contributions in 2018 were under $1,500, suggesting Canadians are not using the Government of Canada education savings grants entirely.

There’s another reason to open an RESP in the form of an additional federal program that is available that can help finance your child’s future education.

The Canada Learning Bond (CLB) is available to beneficiaries who are from low-income families. Personal contributions are not required to receive the CLB. The CLB provides an initial payment of $500, and $100 for each subsequent benefit year of eligibility, up to the benefit year in which the beneficiary turns 15, to a maximum of $2,000. You can also claim the CLB for previous years during which the child was eligible, even if you had not opened an RESP in those years.

In 2018, more than 690,000 beneficiaries from families with low incomes received $172 million in CLB payments. Yet, less than 30 per cent of Manitoba children eligible for CLB received payments.

A Registered Education Savings Plan (RESP) is an investment that will grow as your child grows. Money that accumulates in an RESP may not be enough to fund all costs associated with post-secondary education. Still, RESPs can be a significant component of the financing needed.

More than 400,000 students made RESP withdrawals in 2018, and personal contributions in 2018 totalled more than $4.8 billion.